Consumer Spending Up Less Than Expected

U.S. consumer spending rose less than expected in January as households took advantage of the largest increase in incomes in more than 1-1/2 years to rebuild.

The Commerce Department said spending edged up 0.2%, the smallest increase in seven months, after an upwardly revised 0.5% rise in December.

Economists polled by Reuters had expected spending, which accounts for about 70% of U.S. economic activity, to rise 0.4% in January.

Real spending fell 0.1%, the first decline in a year, after rising 0.3% in December. The drop in real spending offered an early confirmation that spending would slow down.

Spending in the fourth quarter grew at a 4.1% annual rate, the fastest in more than four years.

Incomes rose 1.0%  last month, the largest increase since May 2009, after increasing 0.4% in December. The increase in January outpaced economists expectations for a 0.4% rise.

The report also showed the Federal Reserves preferred measure of consumer inflation -- the personal consumption expenditures price index, excluding food and energy - edged up 0.1%.

In the 12 months through January, the core PCE index rose 0.8 percent after rising by the same margin in December .